2021 Workers’ Compensation Rule and Statute Updates

Spring is in the air – it must be time for Colorado legislative and Division of Workers’ Compensation updates.  As always, L&B is here to ensure you are aware of and understand them all.  Below is our review of the April 30th changes, the upcoming changes effective July 1st, as well as proposed legislation. 

Round 1. Rules first:

Rule 2: Workers’ Compensation Insurance Premium and Payroll Surcharge (EFFECTIVE 7/1/21)

Last year, Of Counsel Frank Cavanaugh pointed this rule out, as an approved rate reduction in “loss costs” had occurred. This year it again went down.   Loss costs are the average cost of lost wages and medical payments paid to or on behalf of the injured worker.  This is a component of an employer’s premium calculation.  Rule 2 changes do not have anything to do with claim handling and, therefore, do not require coverage.

 

Rule 4: Carrier Compliance (EFFECTIVE 4/30/21)

4-1(A): The changes in this section are primarily removing language and have little practical effect; however, it is important to understand the content. Believe it or not, some of the terminology throughout the rules did not match.  So efforts were made to apply clarity.

4-1(C): In this section again, language was removed, and it was clarified that fines can be imposed if the carrier does not meet 90% or higher compliance in each of the 10 categories audited.

4-1(D): The change under this section requires that after the carrier receives the preliminary audit they may request an extension of time beyond the 30-day time frame  to disagree with the findings. The request, however, must be submitted in writing within the 30 calendar days from receipt of the report to respond. If the response is not submitted in writing, it will be considered a “waiver of the right” to file a disagreement with the audit.

There were some additional changes under this section; however, these changes were not substantive.

4-2Fines for Claims Audits

4-2(E): The change to this section removed the fines per audit deficiency per compliance category. The rule provides for a fine for deficiencies in each category; however, they removed the increased fine for “subsequent finable occurrences”.

 

Rule 5: Claims Adjusting Requirements (EFFECTIVE 7/1/2021)

 5-1:  Completion of Division Forms

 5-1(D): This was an added section requiring electronic filing. It specifies that there can only be one file per electronic submission and all attachments must be included. You must include the claimant’s first and last name and the type of document being filed with a certificate of the date it was submitted. It is specific that admissions, petitions to modify, terminate, suspend, request for lump sum payments, and motions to close for lack of prosecution must be sent to  CDLE_DOWC_FILINGS@STATE.CO.US.  It also formalized a requirement recently added that all motions to close must have email addresses for all parties or they are to be submitted via regular mail.

All motions, other than those to close a file, and submissions for prehearings and settlements must be submitted to CDLE_DOWC_PREHEARINGS@STATE.CO.US. All other communications are to be submitted to CDLE_WORKERS_COMPENSATION@STATE.CO.US.

 

5-2: Filing of Employers First Report of Injury

5-2(B)(1): This change requires the filing of a First Report of Injury within 3 days of notice to the insurance carrier or the self-insured when a fatality occurs, or when 3 or more employees are injured in the same accident.

5-2(B)(2): Language was added to emphasize that a First Report of Injury must be filed no more than 10 days after notice to an employer or self-insured of an occupational disease resulting in lost time from work in excess of 3 shifts or calendar days, occurrence of permanent physical impairment, or contraction of a specified occupational disease.

 

 5-5(A): Admissions of Liability

 The language changed to specifically require that the narrative report and the worksheets should include a statement from the authorized treating physician regarding the date of maximum medical improvement, permanent impairment, and the need for maintenance medical benefits. Under paragraph (1), if maintenance medical benefits are being denied,  a reference must be made to the date of the medical report which supports your denial, along with the physician’s name. The DOWC has already changed the FAL forms. Under paragraph (3) (dealing with medical-only claims that have been reported to the Division), if no impairment, either a narrative report or the physicians report of workers’ compensation injury form can be used as long as they are attached.

 

5-8: Admission for Permanent Total Disability Benefits

In this section (B)(2) was removed, which required receipt or proof of payment of compensation to the claimant through the date of death.

 

5-9: Revising Final Admissions

 The change to this rule removed paragraph (C), which dealt with admissions of liability on or after July 1, 1991- and before August 5, 1998. This change appears to be more housekeeping in nature.

 

Rule 6: Modification, Termination or Suspension of Temporary Disability Benefits  (EFFECTIVE 7/1/2021)

The changes in this rule are to clarify terminology. Under paragraph 6-1(A)(2), there was a change from the term “regular employment”  to “full or regular duty.”  Paragraph 6-1 (A)(3)  changed “report” to “Statement” and added language regarding claimant returning to work “at full wages and hours.”  The other changes clarified language but did not substantively change the rule.

 

6-4: Suspension, Modification or Termination of Temporary Disability Benefits by Petition

The significant change in this rule is under paragraph (B). When retroactively decreasing temporary benefits but with a previously filed admission of liability, the petition must be filed within 30 days of the original admission and this process cannot be used for a safety rule violation. The right to set a hearing remains and is usually needed for the denial of the petition.

 

7-1: Closure of Claims and Petitions to Reopen (EFFECTIVE 7/1/2021)

7-1(C)(1):  This was added confirming the Division’s position that they will not allow case closure for failure to prosecute if a claimant is receiving temporary disability benefits. Under paragraph (2), they have also emphasized the motions or petitions to close can be submitted via email if there are email addresses for all parties. If not, they are to be filed by mail.

 

7-2: Petitions to Reopen

The change in this rule outlines that the process to reopen a claim is by filing an application for hearing endorsing the issue of reopening. It effectively took away the process of a petition to reopen on a standard Division form.

 

Round 2. Legislation:

Legislation is a yearly struggle, given the makeup of the legislature in Colorado. We see a continual battle to shift the control of claims to the claimants which, of course means, to their attorneys. Each year there are behind-the-scenes negotiations to try to compromise what could be drastic changes, and this year is no exception.

 

SB21-096: Sunset Workers’ Compensation Classification Appeals Board

Most of you would not be involved with this process. This board was set up to hear grievances brought by employers against insurers concerning the calculation of experience modification factors and classification assignment decisions. This board was due to expire and it has now been continued with clarification. This was signed by the Governor on April 15, 2021 and is the law.

 

HB21-1213: Conversion of Pinnacol Assurance

This bill was introduced to change Pinnacol from a political subdivision of the state to a stock insurance company. It is now postponed indefinitely.

 

HB21-1207: Overpayment of Workers’ Compensation Benefits

There has been a push through legislative actions and through the case law to dramatically alter the ability of respondents to collect overpayment of benefits. This bill defines overpayment in a very restrictive manner, to include only benefits paid as a result of fraud, or duplicate benefits that are resultant of offsets regarding disability or death benefits. It does still allow for offsetting and taking credit for any indemnity benefits paid beyond the date of MMI. If the error was a miscalculation issue, it can be remedied within the 30 days allowed for an objection to the admission. This bill is still under consideration.

 

HB21-1050 Workers’ Compensation

 This bill has been referred to as the compromise bill. There are some major inclusions, which in the past have given flexibility, but now the outcome is defined.

  1. In the present form, if passed, the bill will require appointment of Guardian ad litem and conservators to the list of medical aid that an employer must furnish.
  2. This bill also limits credit for Social Security benefits to those benefits which the claimant was not receiving at the time of injury. In the past, we have been able to take credit for SSDI benefits even though they were being received at the time of injury.
  3. The ability to take apportionment against TTD, TPD and medical benefits is gone. The ability to reduce PPD and PTD is still at issue.
  4. There are also specific limitations when selecting IME physicians.
  5. One of the more drastic changes that will affect benefits is changing the percent of impairment needed to exceed the first PPD cap from 25% to 19%.
  6. Respondents will now be unable to withdraw an Admission of Liability when two years have passed from the admission, with the exception of fraud.
  7. For the purpose of appeals, this bill would require the Director or the ALJ to award benefits when compensability or liability are at issue. This does help respondents, as claimants can’t get an order that a case is compensable and prevent an appeal of that decision as the ALJ didn’t order benefits paid. There are also discussions regarding appeals, orders, and the review process.
  8. The amount that a claimant must earn for respondents to reopen a prior determination of PTD is increased from $4,000 to $7,500.
  9. The claimant will now have to submit mileage reimbursement within 120 days and the carrier has 30 days to pay or dispute.

This bill is currently still being considered so the final version is unknown.

 

SB21-197: Workers’ Compensation Physician

This bill is probably the most dangerous of them all. Over the past several years, claimants’ bar has pushed to reduce and change respondents’ ability to control medical care. This bill, if enacted, will give all control of choice of physician to the claimant.

The current designation of physician process would be gone. The employer would have 7 business days after notice of the injury to give the employee or claimant an authorized physician designation form developed by the Director. At that point, the claimant would be able to designate any level I or level II accredited physician as the authorized treating physician. They are able to make this designation up until the time they reach MMI. The claimant can also make a request to have his/her personal physician or chiropractor be the treating physician. If the treating physician will no longer treat the claimant, the insurer or self-insured must advise the claimant that they need to choose a new physician.

This bill is currently in the Senate Business, Labor, and Technology Committee so the final version is unknown.

If you have any questions about the updated Rules, or any employment or workers’ compensation related question, please contact Lee & Brown, LLC.

 

Changes to Rule 16 Effective January 1, 2018

Everyone’s favorite Rule is getting a makeover effective January 1, 2018.  There are several minor changes to the Rule that will impact prior authorization requests and ensure that a second opinion is timely obtained by the payer.  The major change that will take effect is to Rule 16-11(E) and the elimination of the option for the payer to request a hearing within the time-frames set forth in Rule 16-11(A) or 16-11(B).  The Division hopes to streamline the payer’s ability to contest prior authorization requests and ensure that a second opinion is obtained in a timely manner.  Rule 16 was previously revised and hoped to reduce overall litigation; however, the changes to the Rule contained some ambiguities and loopholes further ensuring that clarification was needed in 2018.

 

The current form of Rule 16-11(E) indicates:

Failure of the payer to timely comply in full with the requirements of section 16-11(A) or (B), shall be deemed authorization for payment of the requested treatment unless:

 

(1) A hearing is requested within the time prescribed for responding as set forth in section 16-11(A) or (B) and the requesting provider is notified accordingly.  A request for hearing shall not relieve the payer from conducting a medical review of the requested treatment, as set forth in section 16-11(B); or

 

(2) The payer has scheduled an independent medical examination (IME) within the time prescribed for responding as set forth in section 16-11(B).

 

This portion of the Rule took effect January 1, 2017 and is effective through December 31, 2017.  The Rule allows the payer to request a hearing within 7 business days of the receipt of the request for prior authorization.  However, it does not specify “when” the payer should conduct a medical records review.  It only indicates that the obligation is there for the payer to conduct one.  The Rule in subsection (2) also allows for an IME to be scheduled within 7 business days but does not delineate when the IME should take place.  For the claimant, significant delay is possible in waiting for the second opinion from the IME physician.  Theoretically, a payer could “schedule” an IME within 7 business days but have the IME take place at a much later date due to the availability of the IME physician.

 

The major changes that will be effective on New Year’s Day specifically indicate what a payer can due to contest a request for prior authorization, (if a medical records review is not possible), while taking into consideration the timeliness of obtaining the opinion for the claimant.

 

The new version of Rule 16-11(E) indicates:

Failure of the payer to timely comply in full with section 16-11(A), (B), or (C) shall be deemed authorization for payment of the requested treatment unless the payer has scheduled an independent medical examination (IME) and notified the requesting provider of the IME within the time frame prescribed for responding set forth in section 16-11(B).

 

(1) The IME must occur within 30 days, or upon first available appointment, of the prior authorization request, not to exceed 60 days absent an order extending the deadline.

(2) The IME physician must serve all parties concurrently with his or her report within 20 days of the IME.

(3) The insurer shall respond to the prior authorization request within five business days of the receipt of the IME report.

(4) If the injured worker does not attend or reschedules the IME, the payer may deny the prior authorization request pending completion of the IME.

(5) The IME shall comply with Rules 8-8 to 8-13 as applicable.

 

 

One aspect of the Rule that must be remembered by the carrier is the “first available appointment” portion of scheduling the IME.  As is usually the case, an IME physician will have a busy schedule and may not have an appointment within 30 days.  While an IME can still be scheduled up to the 60-day deadline with a physician of the carrier’s choice, this portion of the Rule must be complied with strictly so as to prevent delay in obtaining the second opinion for the claimant.

 

Another portion of the Rule that may create certain “arguments” is the duty on the IME physician and the carrier to have the report concurrently served on the parties within 20 days of the IME.  Although the Rule is silent as to what happens if the report is not concurrently served, or is late, the Rule still contains the original provision that a failure to comply is deemed authorization of the particular procedure.  The Rule appears to create an obligation on the payer to ensure that the IME physician is timely with his/her report.

 

Lastly, an ALJ always has the ultimate jurisdiction to determine whether a procedure is reasonable, necessary, and/or related to a claim since it will always involve a finding of fact.  However, there is also established case law indicating that a failure to timely comply with Rule 16 and/or a failure to timely authorize a recommended procedure from an authorized treating physician could be a continuing penalty situation in which an ALJ could find that the carrier acted unreasonably and that penalties should be awarded from the date of the request through the date of authorization.

 

It is always best to understand the particular changes to the law well in advance of when they take effect.  For any questions regarding the upcoming changes to Rule 16 and their application to a particular set of facts, please contact any of the attorneys at Lee + Kinder, LLC.

 

SUBROGATION – SALE OF THE LIEN

BACKGROUND

Colorado’s workers’ compensation subrogation statute, located at S 8–41–203, C.R.S., is poorly worded and has become more complex through legislative revisions over the years. At its heart, the statute allows payment of compensation under the Colorado Workers’ Compensation Act to operate as an assignment of a cause of action against another person or entity “not in the same employ” whose negligence or wrong produced injury or death for which benefits are paid. The right of subrogation applies to all compensation including medical, hospital, dental, funeral and other benefits. The assigned and subrogated case includes the right to recover future benefits. It extends to money collected from the third party that produced injury for all economic damages, physical impairment and disfigurement. The assigned and subrogated cause of action does not extend to money collected for non-economic damages awarded to the injured worker for pain and suffering, inconvenience, emotional stress or impairment of quality of life.

People familiar with workers’ compensation subrogation are aware of judicial apportionment between the injured worker and the carrier. Further, the carrier is responsible for any prorated share of fees and costs the injured worker incurred in obtaining a settlement or judgment from the third-party, should the carrier elect to not pursue the matter on its own. This can lead to significant uncertainty for the carrier in trying to determine whether to pursue the third-party on its own or come to an agreement with the injured worker for a percentage of gross or net recovery. In most circumstances the workers’ compensation case is open and moving forward while the third-party case is pending, whether filed or not. What to do with the third-party case is a complicated, multifaceted decision-making process; however, at least in some circumstances, the decision can be simplified by selling the recovery rights (although not technically a lien, I will refer to it as a lien in this article) to the defendant in the third-party case.

LIEN SALE EXAMPLE

I recently had a case where sale of the lien made sense. The injured worker’s claim had been closed by settlement. Therefore, the total amount of potential recovery was known. The case involved a car accident where the injured worker was hurt in a rear-end collision. The total amount of insurance to cover the loss and liability of the negligent driver was also clear. The injured worker was pursuing the negligent driver in the third-party case and the workers’ compensation carrier elected to not bring its own cause of action. In settlement discussions in the third party case, it was clear that the negligent driver’s carrier would offer little or nothing to settle the case despite clear liability. The third-party carrier was willing to go to trial over causation of injuries that were largely compensated under the workers’ compensation system. Given these circumstances, I spoke directly to counsel for the injured worker to try to broker a deal on a percentage of potential recovery. We could not come to an agreeable percentage. I advised counsel for the injured worker that I was in discussions with the negligent driver’s carrier to have it buy my carrier’s lien. Since I could not come to an agreement with the injured worker’s attorney, I simply sold my client’s subrogation lien to the defendant in the third-party case. This guaranteed recovery for my client. The third-party case went to trial and the injured worker recovered no damages. The defendant in the third-party case submitted trial briefs asserting some set-off against potential damages based on the lien it purchased. The trial court held off any determination of a set-off. In the workers’ compensation case we had paid approximately $100,000, split evenly between medical and indemnity benefits. We sold the lien for $30,000. At issue before the trial court in the trial briefs was the value of the purchased lien. Was the purchased lien worth $100,000 set-off against billed medical, lost wages and permanent impairment claimed as damages in the third-party case? In the alternative, was the lien worth $30,000 as some undivided lump sum that can be set-off against all awarded damages? It is clear why the trial judge elected to not answer these questions, but let the jury come back with a decision on damages. The trial judge would have a difficult time figuring out what the defendant purchased from the workers’ compensation carrier and what it was worth. The jury saved the trial judge that headache since they found liability, but no damages. Regardless of the trial judge’s ultimate conclusion, my client’s had successfully recouped 30% of their lien and halted their exposure for on-going litigation expenses.

RAMIFICATIONS OF THE SALE

Counsel for the injured worker tried mightily to argue that respondents should reimburse the injured worker out of the $30,000 sale proceeds to account for its share of attorney fees and costs in the unsuccessful attempt to recover against third-party. Counsel for the injured worker was unsuccessful in all of his attempts. There was simply no legal basis to require the workers’ compensation carrier to pay for a share of unsuccessful litigation by the injured worker. That stated there is an appeal to the argument that it is unfair for the workers’ compensation carrier that did not actively participate in the negligent third-party case, to derive benefit from selling its lien without paying for the work done in the third-party case, even though it was unsuccessful.

BOTTOM LINE

Sale of the workers’ compensation lien is a viable option of recovery for respondents holding a subrogation lien; nevertheless, sale of the lien should only be done in certain circumstances. Sale of the lien when the workers’ compensation case is still open would not be recommended. Sale of the lien, for practical purposes, reduces any amount that could be used to settle the third-party case. This makes it more likely that that case will go to trial where the lien value will be used against the injured worker. This is not a good position for the workers’ compensation carrier. The workers’ compensation carrier still has obligations to claimant under the workers compensation system and in an open workers’ compensation case it should probably not sell its lien to the defendant in the third party case.

As a result of the lien sale in my specific case, there are rumblings in the claimant/plaintiff bar that they may try legislatively to prevent the sale of liens generated from workers’ compensation cases. As of now, no such legislation has been introduced.

We always recommend discussing this legal strategy with your counsel prior to embarking on this path. Whether the sale of a subrogation lien is viable depends largely on the specific facts of each case.